Should You Get PAID?

On March 6, 2018, the US Department of Labor (DOL) announced a new pilot program: Payroll Audit Independent Determination, or PAID. The stated purpose of the program is to expedite resolution of overtime and minimum wage violations under the Fair Labor Standards Act (FLSA).

What exactly is PAID?

This is a nationwide pilot program, slated to last approximately six months, offered by the DOL. Under the terms of PAID, employers can conduct a self-audit of their payroll practices. If they discover any violations of the FLSA they can apply to the DOL to participate in the PAID program.

Why would anyone want to voluntarily report violations of the FLSA to the DOL?

It can potentially save employers a lot of money and hassle. First, he DOL will not assess any liquidated damages or civil money penalties in conjunction with the issues covered under the PAID program. If the DOL finds violations on their own as part of an agency-conducted audit, they typically will assess these additional amounts.

Second, you can reduce or potentially eliminate attorney’s fees and litigation expenses related to the reported violation(s). You will not be sued by the DOL, so you can avoid the time, hassle and expense of defending in court against a federal wage and hour claim.

Employees have the choice whether to accept or reject the settlement under the PAID program. If they accept, they must sign a release stating they will not sue the employer for the specific violations and specific timeframe covered by the self-audit.

Employees who accept the settlement will quickly receive 100% of the back wages owed to them, without the delay, uncertainty and headaches of filing a lawsuit on their own. This can make accepting the settlement offer an attractive option for them. Every employee who accepts the settlement is one more who won’t file a lawsuit related to that violation.

What happens after your application to participate is accepted?

If your application is accepted, you must disclose the results of your self-audit to the agency. Generally, this means you must:

Identify the specific violation(s) that occurred;

Identify the specific employees who were affected;

Specify the timeframe during which each employee was affected;

Calculate the amount of back wages the employer believes are due.

The DOL will review the information you furnished and potentially request additional information or conduct further discussions with you. Finally, they will give you a summary of the final amount of back wages due to each employee.

They will issue to each employee a form describing the terms of the settlement, including a release of liability covering the reported violation. Employees who choose to accept the settlement terms must sign the release.

By the end of the next full pay period after you receive the summary of unpaid wages from the DOL, you must then pay each employee who accepts the settlement all back wages due. You must also “expeditiously” furnish the DOL with proof of payment.

Finally, you must certify going forward that you will correct the pay practices that led to the violation.

Are there any limitations on who can participate?

Yes. As part of the application, the employer must certify they are not currently in litigation related to the reported violation. In other words, if somebody has already sued you for the violation  whether it’s an employee (or group of employees), the state labor board, or the DOL  you can’t participate in the PAID program for that violation.

Of course, if you happen to discover other violations for which you haven’t (yet) been sued, you could apply and try to have those additional issues settled through the PAID program.

Also, you can’t use the program repeatedly in an attempt to resolve the same potential violations. The purpose of the program is to identify and correct violations, not as a “get out of jail free” card for employers who repeatedly violate the FLSA.

Does the PAID program get employers totally off the hook for FLSA violations?

Not necessarily. Employees can choose to reject the settlement, which means they would still have the right to pursue their own lawsuits related to the alleged violations.

In addition, if an employee accepts the settlement and signs a release, the release will be narrowly tailored to only address the specific violation(s) and timeframe covered by the self-audit. Employees will still be free to pursue private legal action for any other violations they might believe have occurred.

In addition, at present the DOL documentation for the program doesn’t address what might happen at the state or local level. If an employer reports a violation of the FLSA that is also a violation of state law, could they find themselves in trouble at the state level? At this point, it’s unclear. For this reason, many labor law attorneys are advising employers to proceed with caution.